You may have heard about the recent resurgence of US oil production thanks to shale oil, but this is actually a little misleading. The term “shale oil” can refer to both oil produced from oil shale and light crude oil from low permeability, petroleum-bearing formations, such as shale or tight sandstone. To avoid ambiguity, it’s usually recommended to use the term “tight oil” or “light tight oil” for the latter.
The United States has engaged in oil shale production, but it’s tight oil that is responsible for the country’s recent resurgence in oil production, with it expected to account for over half of US production in the coming decades.
The technology to economically exploit tight oil resembles that for shale gas extraction, namely in the form of hydraulic fracturing and horizontal drilling. This has led to tight oil production being mostly focussed in the US and Canada, with them hosting two thirds of the world’s drilling rigs. The availability of expertise and suitable equipment in these countries, as well as the supporting infrastructure and the ease of obtaining drilling rights, has fuelled the tight oil industry. In 2012, more new tight oil producing wells were brought online in the US than the combined wells outside of the US and Canada, including conventional and unconventional oil sources and gas wells.
The United States alone is estimated to have some 48–58 billion barrels of technically recoverable tight oil, but not all of this will be economical to recover. The yield from tight oil wells can vary considerably, even between nearby holes in the same field, due to the heterogeneity of tight oil formations. This can cause problems when deciding the economic feasibility of a particular prospect. A formation should also contain at least 15–20% natural gas to pressure oil into the borehole, otherwise production will not be an economic reality.
ExxonMobil, the maker of Mobil DTE 24, is betting heavily on US tight oil. At the start of this year, the company agreed a deal to spend $6.6 billion buying up companies with drilling rights in the Permian Basin region of New Mexico and Texas.
With the US being the world’s top oil consumer by far, tight oil producers have an eager market on their doorstep. Much depends on oil prices, however, as breakeven costs for tight oil can vary from $30/barrel to over $100/barrel depending on the particular play.